The cure for high unemployment

March 15, 2010

Gary Becker gets straight to the point:

The only real remedy for the long-term (and other) unemployed is to have the economy grow fast, as it did after the severe recession in 1982 when unemployment peaked in December of that year at 10.8%, and then fell rather rapidly. There is no magic bullet to accomplish this, but I do believe it would help a lot if the leaders in Washington did not try to radically transform various aspects of the economy while we are recovering from a serious recession, and thereby magnify the high degree of uncertainty that is typically caused by a recession. Instead, they should be concentrating on fighting the recession, and stimulating long-term economic growth.

Me: During the 1980s, the economy notched 19 quarters of 3.5 percent GDP growth or better. In the 1990s, the economy also notched 19 quarters of 3.5 percent growth or better. So far this decade before the recession? Just eight. Or look at the number of quarters of “hypergrowth”—5 percent or better. (This was JFK’s GDP goal in the 1960s, by the way.) There were 12 in the ’80s, eight in the ’90s. So far this decade? Just a single quarter, the third quarter of 2003.

3 comments

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Jim,
Do you not see how this goal, like other goals for politicians, will cause more central planning and top-down control?

We’re going to have another useless debate about the causes of growth, which will lead to a combination of more spending and tax cuts. Politicians are likely to pressure the Fed to keep rates low.

How about discharging politicians of the responsibility of goals altogether? They had a goal of increasing home ownership and that caused the current financial mess.

They will not even admit that. To them, their policies are so exquisitely crafted, like a fine wine, the only reason the outcome is different is because some greedy bastards fouled it up somewhere.

Limit the power of politicians, rather than giving them more to do and more reasons to botch things up.

Posted by Liberty Lover | Report as abusive

Economic growth has to begin with jobs…business and consumer confidence will follow.
Below is the KEY and most viable initiative to return people back to work. It’s time for bold action…a specific plan…targeting a specific group…for a specific issue….job creation. This initiative will literally create 1 to 3 million+ job opportunities utilizing existing programs and funding. To ignore such an initiative is truly an injustice to the jobless and their families.

Plan: Allow seniors age 62-64 who have NOT yet enrolled in Social Security to be Medicare eligible if they retire early. Our survey shows vast majority of these targeted seniors continue to work or seek employment for employer health insurance… with plans to retire at age 65…when Medicare eligible. The KEY is to speed attrition of these seniors from the labor pool by allowing Medicare eligibility. A time sensitive program…a 30-90 day window of opportunity for these seniors to decide if they would take advantage of this Medicare incentive or continue to work. A vast number would retire creating vast opportunities for the jobless. Healthy seniors would be NO additional cost to Medicare. This plan will produce results unmatched by any stimulus… past or present…using existing programs and funds.

Bonus For Business: Our survey had employers applauding such an initiative for these seniors. Why? Their response was unanimous…Retiring senior employees would be replaced by entry level…lesser salary and benefited employees. Examples given: New employees earning $3-$5 less/hour than the exiting seniors would result in business payroll saving $5,000-$10,000 per year/per new hire…for a number of years. This is the bottom line help business needs…and this Medicare incentive would deliver this help.

Why Plan Is So Critical: Consumer/business confidence very low. Consumers not spending…business will not hire until a sustained increase in demand for their product/service. Worker productivity is up and seniors are working longer. These will all make job recovery very difficult and may take years! The solution is this Medicare incentive to early retiring seniors…their vacated positions are needed now.

Social Security/Medicare: The CBO has stated SS is funded to 2037. Medicare is funded to 2018 and stated both programs will need to be re-structured and strengthened in the future. Returning the jobless to work will again have them contributing into these programs…generating critical tax revenues for the states.These two programs…SS and Medicare are tools that should be used now to speed senior attrition…create vast job opportunities…provide business a real payroll incentive.

It Doesn’t Stop With The Jobless: It goes far beyond the current unemployed. There are additional millions of under-employed…graduates ready to begin their careers…returning military personnel…and students looking for their first job. 460,000 people lost their jobs last month…How many may have retained their jobs if senior co-workers were allowed this Medicare incentive and retired under this jobs program?

Please help pass the word…we need to be heard.

Posted by Hank L | Report as abusive

The high unemployment situation will not change.The jobs lost in manufacturing is the main cause of ub-nemployment and recession.
There is no sector which will replace manufacturing jobs.The West and America are blinded by cheap imports and Free Market. China and India are growing at tremendous rate and in another year they will acquire many sucessful Companies . Still time to wake up and encourage consumer goods manufacturing.Scrap minmum wage and lets compete.Make our own goods for our own benefit .we will all be happy working again

Posted by I A | Report as abusive